Discover when the New York Stock Exchange applies Program Selling Curbs

Whenever CNBC runs a banner on your television screen that says CURBS INor CURBS IN, we receive a ton of email from investors asking "What are curbs?" Here is the answer for you:

Program Trading "Collars"A collar on program selling firms instituted by the NYSE is most commonly referred to on CNBC as "curbs in". The NYSE applies program selling curbs whenever the Dow Jones Industrial Average moves a certain number of points higher or lower than the previous day's closing price.

This NYSE restriction on program trades stays in place until the Dow Jones returns to within a certain number of points of the previous day's closing price; or, until the end of the trading day at 3:00 CT. The restrictions will be re-imposed each time the Dow Jones advances or declines by a certain number of points. NYSE Trading Curbs apply only to our firm's (and other program trading firm's) computer assisted program trades. Contrary to what the public thinks, these collars do not completely stop all program trading, nor do they cancel out today's premium (prem) execution levels.

The NYSE defines a Program Trade as: 1. A basket of 15 or more stocks from the Standard & Poor’s 500 Index. 2. A basket of stocks from the Standard & Poor's 500 Index valued at $1 million or more.

Once the NYSE program trading collar is in place, Program Sellingcan be executed only on an up-tick. That means that the last trade was executed at a higher price than the trade before it. Program Buyingcan be executed only on a down-tick. That means that the last trade was executed at a lower price than the trade before it.

Program Trading "Sidecars"In the past, this was another type of NYSE Trading Curb. It was eliminated on Tuesday, February 16, 1999.

Program Trading "Circuit Breakers"If the Dow Jones Industrial Average falls 10%, trading is halted on the New York Stock Exchange for 60 minutes. If the Dow Jones rallies 10%, there is no restriction. Why? Because program buying and the accompany rally is always perceived as "good".

If the Dow Jones Industrial Average falls 20%, trading is halted on the New York Stock Exchange for two hours. There is no trading halt if it rallies 20%, as that would be perceived as "very very good".

If the Dow Jones Industrial Average falls 30%, trading is halted on the New York Stock Exchange for the day. There is no trading halt if it rallies 30%, as that would be perceived as "the best thing that ever happened in the history of the world".